Buffettology, Mary Buffett
2/28/07
Excellent take on how Warren Buffet evaluates, not stocks, but businesses. Easy to forget that that is what the strock market is, the buying and selling of parts of companies. Buffet sees two “parts” to the market, the near term speculative market and the longer term investment market. He has no interest in the speculative market.
When evaluating a company buffet looks first at what he wants to buy (type of company) and then evaluates qualitative properties followed by quantitative prosperities. That is, what to buy, and then, at what price.
Qualitative (p 101):
1. Does the biz have an identifiable consumer monopoly?
2. Are the earnings of the company strong and showing an upward trend?
3. Is the company conservatively financed?
4. Does the business consistently earn a high rate of return on shareholders’ equity?
5. Does the business get to retain its earnings?
6. How much does the business have to spend on maintaining current operations?
7. Is the company free to reinvest retained earnings in new business opportunities, expansion of operations, or share repurchases? How good a job does the management do at this?
8. Is the company free to adjust prices to inflation?
9. Will the value added by retained earnings increase the market value of the company?
Consider business capital and the cost to replace, the candy company vs. car company.
Quantitative
Test 1 – Determine, at a glance, predictability of earnings… are they going up?
Look at rate of equity growth and consider the rate of increase, project fut value.
Do the same with earnings
Alternative Investments
When not in a good investment, the following are used:
· Long-term fixed-income securities
· Medium-term fixed income securities
· Short-term cash equivalents
· Short-term arbitrage commitments (favorite)
Arbitrage
G, expected gain, if a gain
L, expected loss, if a failure
C, changes of success, percentage
Y, expected time of holding, in years
P, current price
Annual return = (CG-L(100%-C))/(YP)
Wednesday, February 28, 2007
Sunday, February 11, 2007
Book: Blink
Blink, Malcom Gladwell
Fascinating book about the unconscious mind. The ability of the unconscious mind to process all that is going on around us and give us clues. All the little facial expressions and personality nuances tell so much. For example “contempt” in a relationship is perhaps the greatest of posins. It discusses how one can leverage the “thin slicing” and at the same time, how your prejudices can hamper your minds ability to give you an accurate picture. Another association with this ability with “mind reading” and then showing how under highly stressful conditions the “thin slicing” mechanism shuts down. Practice, etc allows you to not have this happen in stressful circumstance. The last example is how women have entered into orchestra by auditioning behind screens because people prejudices were not allowing them to take the music for what it was.
Simply amazing insights into how the human mind works. Certainly worth more examination of these thin sliced signals that show what a person is thinking and feeling. It offers a better way to connect with people, and also a better way of judging peoples intentions.
Fascinating book about the unconscious mind. The ability of the unconscious mind to process all that is going on around us and give us clues. All the little facial expressions and personality nuances tell so much. For example “contempt” in a relationship is perhaps the greatest of posins. It discusses how one can leverage the “thin slicing” and at the same time, how your prejudices can hamper your minds ability to give you an accurate picture. Another association with this ability with “mind reading” and then showing how under highly stressful conditions the “thin slicing” mechanism shuts down. Practice, etc allows you to not have this happen in stressful circumstance. The last example is how women have entered into orchestra by auditioning behind screens because people prejudices were not allowing them to take the music for what it was.
Simply amazing insights into how the human mind works. Certainly worth more examination of these thin sliced signals that show what a person is thinking and feeling. It offers a better way to connect with people, and also a better way of judging peoples intentions.
Sunday, February 4, 2007
Book: Why We Want You To Be Rich
Why we want you to be Rich, by Donald Trump and Robert Koyisaki
2/4/07
Great motivational book. Bottimline, the U.S. dollar is week, checks for pensions have been written that cant be cashed, real estate and natural resources have intrinsic value. The purpose of this book is to open folks eyes to the fact that living below your means as an employee isn’t necessary. The real money is big business and investment. He discusses how to “leverage” other peoples money for sure things. Big “equations “ are:
Control = no risk
Thoughts à actions à reality (and repeat)
Final recommendations are to invest in real estate to take advantages of tax situations, avoid stocks and such because there is little control and minimal tax breaks.
What I want to do: Look at a situation and ask “How do I profit.”
2/4/07
Great motivational book. Bottimline, the U.S. dollar is week, checks for pensions have been written that cant be cashed, real estate and natural resources have intrinsic value. The purpose of this book is to open folks eyes to the fact that living below your means as an employee isn’t necessary. The real money is big business and investment. He discusses how to “leverage” other peoples money for sure things. Big “equations “ are:
Control = no risk
Thoughts à actions à reality (and repeat)
Final recommendations are to invest in real estate to take advantages of tax situations, avoid stocks and such because there is little control and minimal tax breaks.
What I want to do: Look at a situation and ask “How do I profit.”
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